@ Beme

In a prosperous nation like Australia, the issues that Bitcoin aim to solve are far less perceivable compared to other poorer or authoritarian nations. Bitcoin’s value proposition is less relatable because we have access to banks, our economies are generally tolerable, and everything to some degree just works.

Conversations about Bitcoin in the workplace or among friends and family can be difficult. You may often be dismissed, called names (mine is “future boy”), or perceived as someone belonging to a cult. And people will bring up the common arguments against Bitcoin purported by the media: 1) it uses to much energy, 2) it is volatile, 3) it encourages criminal activity like the silk road, 4) it is a Ponzi scheme, 5) its an intangible asset, and 6) its a speculative and immature technology.

Here I will offer some tips I have learnt when talking to people about Bitcoin. My frame of reference is as a Bitcoiner living in Australia, but I think my experience may translate to other developed nations.

Tip 1: Never try convince someone they should buy Bitcoin.

My first tip is to never try convince people to buy Bitcoin, but instead, teach them about Bitcoin and guide them towards sources where they can learn more themselves. The value proposition behind Bitcoin is difficult to understand and people shouldn’t necessarily hold any before they understand the risks and benefits behind the technology.

In my mind, the most important part of a person’s orange pilling is the will and interest to find out more themselves, and make their own decision to buy some.

So your primary aim should be just to find a way to make them interested enough to seek out more information. Here is my shortlist of books, podcasts, and other valuable sources I use when pointing people to find out more.

Tip 2: Bitcoin is an inclusive technology.

One major problem I see with the Bitcoin community is that Bitcoiners set up walls where you are either enlightened Bitcoiner, or you are a “normie”. For someone seeking to find out more about Bitcoin, the community can appear cultish, and being referred to as a “normie” or other names creates an exclusive environment that can dissuade people from finding out more. Everyone will have their own path of discovery as most of us did. Help others find Bitcoin by making the community inclusive.

Tip 3: Be prepared to combat common misconceptions or misunderstandings

1. Bitcoin uses more energy than some country in Europe (no one ever remembers which)

This is probably the most common argument I hear. But as you will see, the real question here is not about the absolute amount of energy use, but a person’s perception of the value per unit energy that it delivers.

The adoption of any new technology that advances society has required energy. This energy consumption is often intense at the beginning and becomes more efficient as the technology develops and drives further investment. Bitcoin miners are the primary consumers of energy in the technology. Most people don’t actually understand why Bitcoin consumes energy — Bitcoin consumes energy to cryptographically protect the value contained within the network. However, inherent to Bitcoin is an economic incentive to reduce energy costs and maximise profits. Miner’s therefore naturally seek out more efficient technologies and cheaper sources of energy.

Over a 5 year period from 2018 to 2023, the energy required per terrahash (energy per unit work) declined by 63%. It is also useful to highlight novel ways in which Bitcoin miners are consuming wasted energy or using renewable sources, such as Iris energy, or Gridless. These and other companies are investing into renewable energy sources. Current estimates of Bitcoin’s renewable energy usage is between 25% and 50%.

In 2016 the power consumption of data centres was estimated to be 200 TWh/y. By comparison, Bitcoin consumes between 75.4 TWh/y and 122 TWh/y. The traditional financial system is estimated to consume 5,000 TWh/y which pales to Bitcoin’s consumption. This is not to say we should be complacent about Bitcoin’s energy use; these are all staggering amounts of energy consumption! But in most people’s mind, the value of data centres and the legacy financial system seems so obvious that they wouldn’t question its energy usage. So the real question should not be about the absolute value of power consumption, but rather whether Bitcoin provides the same global value per unit energy consumed.

Framing the energy argument in terms of the value per unit energy should help to open a discussion on Bitcoin’s value proposition.

2. Bitcoin is volatile

Yes, Bitcoin is volatile! But why is this bad? Most people making this claim are comparing Bitcoin to holding shares in some big tech company. Bitcoin is not a company! Comparing it to a company means you haven’t understood the Bitcoin’s true value proposition of it becoming the hardest form of money. Furthermore, despite its current volatility, Bitcoin continues to outperform most stocks and gold.

Bitcoin is a truly free market asset, unlike other forms of investment influenced by capital controls which act to dampen volatility. Bitcoin’s adoption still sits below 5% globally. As adoption increases, its price will continue to stabilise as it has been over the past decade (see figure below).

Bitcoin price volatility index (source: https://buybitcoinworldwide.com/volatility-index/)

Volatility will continue to be a feature of Bitcoin in the near future. But this is not necessarily bad. Investment into Bitcoin, like any asset, should be taken with consideration of a person’s financial position and their ability to weather this volatility.

3. Bitcoin facilitates illicit activity and the anonymity of the criminals.

There is no escaping the fact that to some degree Bitcoin has facilitated the exchange of drugs and other illicit activity. However, Bitcoin offers a level of traceability that hasn’t existed previously with cash. Bitcoin is not anonymous, it is pseudonymous. It depends on a public ledger that facilitates the tracking funds, and KYC (Know-Your-Customer) on/off ramps that help link transactions back to individuals. This tracking has led to the downfall of the silk road and several associated criminals since. Law enforcement and journalists are constantly coming up with tools to track the the movement of cryptocurrencies used in illicit activity.

Bitcoin is a neutral technology. Blaming Bitcoin for the drug problem is as silly as blaming the internet, the postage service that sends a large portion of drugs, or cars that drive them from location to location. It will never be escape the fact that some people will use it for illegal activity, as people have and will continue to do with any form of money.

4. Bitcoin is a Ponzi scheme.

Many other cryptocurrencies which are actual Ponzi schemes have given people a negative impression of Bitcoin. I once had a family member, who knew about my great interest in Bitcoin gleefully exclaim “Hey did you hear!? Bitcoin is dead!” She was referring to the news about the downfall of OneCoin. This comment made me realise how important it is to help people understand the fundamental difference between a decentralised Bitcoin and a centralised crypto Ponzi.

In simple terms, Bitcoin being decentralised means there is no single entity in charge or profiting from the value of Bitcoin, nor are there profits derived from getting people into Bitcoin.

A follow-on comment I often get is that early adopters cause an imbalance in the distribution of wealth. This is currently true. It is estimated that 0.01% of addresses hold 58% of all Bitcoin. But we currently live in a world of rapidly rising inequality and a financial system that promotes the financial privileged. Over the past 40 years, the top 1% of income earners has seen their share increase from about 11% to almost 20% in the USA (see figure below).

Total share of income of the top 1% of earners (source: https://wid.world/)

You can research into the effects leading to inequality and you will read very contradictory arguments from both sides of the Bitcoin camp. So I’m not going to argue that Bitcoin solves the problem of wealth inequality; that is yet to be seen. But the growing digitisation of financial services is already creating a positive effect in reducing wealth inequality around the world. One of Bitcoins main benefits is that it promotes financial inclusion, which I believe can only result in a positive outcome for reducing inequality.

5. Bitcoin is an intangible asset

I once tried to explain to a family member the link between physical gold and Bitcoin. I used the analogy that energy is trapped in physical gold, and energy is required to extract it. This is similar to extracting and storing energy in Bitcoin. He laughed at me smugly.

Some people will have a really hard time comparing a physical asset to a digital one. They assume a digital asset can be copied, and it has no meaningful use in the real world. Bitcoin requires some tech literacy which you cannot teach in an evening!

Instead, you can highlight that a physical asset like gold is a great store of value; we have been using it to store value for millennia. But it is not a great medium of exchange. How can you break it up into smaller pieces? How do you send it across the world?

Bitcoin solves these problems. Like gold, Bitcoin cannot be copied or debased. But unlike gold, you can send fractions of a Bitcoin instantly anywhere across the globe.

6. Bitcoin is a speculative and immature technology.

Trace Mayer used to talk about the seven network effects of Bitcoin: Speculation, Merchant Adoption, Consumer Adoption, Security, Developer Mindshare, Financialization, and Adoption as a World Reserve Currency.

Speculation, being the first network effect, is an important part of Bitcoin’s maturation. Speculation drives early adoption and leads to the initial growth and innovation. Early adopters face larger risks as the price is more volatile, but also reap larger rewards. As more people adopt, merchants begin to accept it as forms of payment, leading to the second network effect and so on.

Yes, Bitcoin was a speculative asset but it is far beyond it speculative stage. We are currently closer to the “Developer mindshare” stage, where developers are working on new tools and new products that now integrate multiple technologies, like lightning and nostr.

Bitcoin is no longer speculative. I would also argue it is not even immature, even though it has only been around for a decade. But a misconception people often make is that the dollar (AUD or USD) is mature. The dollar as we know it is an experiment that has been running since around 1971, and politicians and economists still have no idea how to control it! Levers are pulled, money is debased and debt is increased time and time again.

Debt to GDP since 1970. Australia saw a moment of recovery duing the early 2000s but began increasing after the global financial crisis in 2008. Japan’s debt skyrocketed in the 1990’s and currently sits around 260%. On average across the G-20 nations, debt has increased from a low of 23% to around 95%. (source https://www.imf.org/external/datamapper/CG_DEBT_GDP@GDD/SWE)

And thats it! I hope you found this useful for the next time you’re speaking to someone about Bitcoin in a developed nation.

Bitcoin Beme

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